India Blocks Offshore Crypto Exchanges as AML Enforcement Accelerates

In its 2024–2025 annual report, Financial Intelligence Unit – India confirmed that 49 cryptocurrency exchanges are now subject to India’s anti-money laundering obligations. The requirement stems from the government’s 2023 decision to classify Virtual Digital Asset service providers under the Prevention of Money Laundering Act, placing crypto platforms under the same compliance regime as banks and other regulated financial institutions.

As of January 5, 2026, the FIU reported that 45 India-based exchanges had completed domestic registration and undergone regulatory review. An additional four foreign-based platforms have also registered, allowing them to legally operate while meeting Indian reporting standards. All registered entities are now required to conduct customer identity checks, monitor transactions, and submit reports on suspicious activity to Indian authorities.

Transaction Monitoring Reveals Criminal Use of Crypto

The FIU’s findings are largely based on Suspicious Transaction Reports submitted by compliant exchanges. These reports, according to the agency, provide detailed insight into how cryptocurrencies are being used within the country — including for illicit purposes.

While the FIU acknowledged that digital assets can support innovation, investment, and financial inclusion, it warned that current misuse remains substantial. The report highlights several recurring risk areas, including illegal online gambling, large-scale organized fraud, unregulated cross-border transfer networks similar to informal money exchange systems, and unlawful adult content platforms.

In one documented case, investigators traced crypto payments through multiple wallets to an illegal website, demonstrating that blockchain transactions can be tracked effectively when exchanges follow proper monitoring and disclosure rules. Under existing regulations, registered platforms must verify user identities, determine beneficial ownership of wallets, track transfers to private wallets, and promptly report suspicious behavior. The FIU also confirmed that penalties were imposed during the last fiscal year on exchanges that failed to meet compliance standards.

Offshore Exchanges Face Access Restrictions

India’s enforcement push has also drawn a clear line between compliant and non-compliant offshore platforms. Major international exchanges such as Binance, Coinbase, and Mudrex have registered with the FIU and are permitted to serve Indian users.

By contrast, the FIU has blocked access to 25 foreign exchanges that refused to register or meet AML requirements. Platforms including BitMEX, LBank, and Phemex are currently inaccessible to Indian users until compliance obligations are fulfilled.

These actions have funneled much of India’s retail crypto activity toward a smaller group of regulated exchanges. Approved platforms are now required to appoint a local director and a designated principal officer responsible for direct communication with government agencies.

Indian authorities have emphasized that their goal is not to eliminate cryptocurrency activity altogether, but to ensure it operates within a transparent, closely supervised legal framework. The FIU concluded that digital assets will remain permissible only insofar as platforms actively cooperate with regulators and uphold strict financial crime prevention standards.

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